Another 4.5 million Americans expected to have filed for unemployment benefits

The coronavirus pandemic’s impact has been rippling through the U.S. economy, and market participants will get fresh data Thursday morning from the U.S. Labor Department reflecting the continued damage being done to the U.S. labor market.

Economists expect another 4.5 million Americans applied for unemployment benefits for the week ending April 18. In the prior week, jobless claims totaled 5.245 million. Over the previous four weeks, more than 22 million Americans have filed unemployment insurance claims.

Continuing claims, which lag initial jobless claims data by one week, is expected to total 17 million for the week ending April 11 after hitting a record 11.976 million in the week ending April 4.

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Even as the number of jobless claims is expected to stay in the million in the near term, economists broadly expect the figure to steadily decline going forward.

“Claims have moved passed the peak more visibly now, but the cumulative number is still rising significantly,” Morgan Stanley economist Jan Kozak wrote in a note Wednesday.

The rise in the cumulative number will be due to the massive backlog of claims that are waiting to be processed, according to Kozak.

Nomura economist Lewis Alexander echoed Kozak’s prediction. “While the labor market remains under severe strain, states that imposed lockdowns relatively early are seeing claims activity improve somewhat,” he wrote in a note to clients April 17.

Certain states got hit harder than others last week as massive backlogs continued to pile up; however, most states saw declining numbers of claims from the previous week. For the week ended April 11, California saw the highest number of initial claims at an estimated 660,000 on an unadjusted basis, down considerably from 918,000 the prior week. New York had an estimated 395,000, Georgia reported 317,000, Pennsylvania had 238,000.

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Alexander also argued that with certain parts of the CARES Act will likely encourage some business to hold off on letting employees go. “That said, with roughly 20mn initial jobless claims filed over the past four weeks, we continue to expect a decline of 20mn or more in April nonfarm payroll employment and the unemployment rate to approach 20% over the next two months,” he said.

Kozak noted that when translating jobless claims to unemployment rates, “not every initial unemployment claim will translate into unemployment insurance benefits. In a nutshell, taking into account BLS methodology as well as transition rates observed in historical relationships, we expect that fewer lost jobs will be counted in the official unemployment rate. For instance, in the headline unemployment rate, a lower share of job losses are registered as unemployed, which offsets the number of job losses.”

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